The Fed funds rate is currently at a target of 1.5 to 1.75 percent. On Wednesday, the Fed opted to hold rates steady, but it is widely expected to announce a hike in June.
That's because he thinks economic growth can start to look sluggish in the future thanks to "demographics, sluggish productivity [and] high levels of debt-to-GDP."
He's also keeping his eye on the bond market.
The yield curve, which tracks the difference between longer- and shorter-term bond yields, is flattening, meaning they are getting closer together. Investors are concerned it may invert, which means long-term Treasury yields would be lower than short-term yields. Historically, when that happens, an economic recession has usually followed.
Kaplan said it would give him "great pause" if he was faced with a decision of raising rates and causing the yield curve to invert.
"I'm not going to predict what I will or won't do," he said. "Right now as I sit here, I don't want to knowingly invert the yield curve."
He believes the flatness in yields "says we're late cycle."
He said 2018 will be a good year, with a lot of stimulus. However, the economy will then start to grow a bit more slowly, he said.